The Exit Strategy
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Written on 23 December 2013
Every investor, entrepreneur or business owner will at one stage of
their business need to consider putting in place an exit strategy with
the ultimate goal of selling their business to ensure the best return
on their investments. This may include selling the assets of the
business, a share sale, merging with another business or transferring
the business to the next generation. In any event an appropriate
strategy must be put in place to ensure the exit strategy can be
carried out as efficiently and most cost effective manner. So while
many business owners may consider ‘a deal as being done’ when the
business is ready to be sold, areas you will need to consider include,
but are not limited to the following:
Accounting/Tax Advice - It is crucial you take advice so that you fully
understand what will work out best for you- asset sale/ purchase or
share sale/ purchase. Often accountants and tax advisors can model
figures for you to show you the net result for you taking in to account
Business Agents - They can either be a God send or a nightmare. Do
check the terms with them carefully and go by recommendations and not
hard-selling agents who attempt to pressure you into signing a contract
with them. A good agent can help to market your business well,
potentially identify a pool of buyers, as well as making approaches to
them and acting as a go between the parties should the deal stall or
the parties are unable to agree on a certain point.
Buyers - Do you have a buyer or a pool of buyers? Having a number of
potential buyers interested is, of course, ideal because you can create
competition between them. You may have a preference with a particular
buyer in terms of their strategic fit with your business or the fact
that you will have to work with them post completion for a period of
time. Once you have a buyer on board you need to plan what is key to
you and negotiate on those points.
Confidentiality and Non Disclosure Agreements - Before anything
confidential is discussed it is always sensible to put in place an NDA.
This will offer you a layer of protection and ensure that confidential
matters relating to your business are not discussed openly without
restriction. It is also sensible to include post-termination provisions
in order to prevent future disclosures.
Due Diligence - This is a fact finding exercise on the part of the
buyer. The buyer will undertake due diligence (investigations) on all
key aspects of the business so that it can get a better understanding
of the business and identify areas of comfort and concern.
Sale/Purchase Agreement - The sale or purchase agreement will set out
all the terms of the transaction between the parties. This is usually
drafted by the buyer's solicitor with input from the seller's
solicitor. The agreement is often voluminous concerning lots of areas
the buyer and seller have thought of and other areas the lawyers think
are prudent to address.
Preparation - Getting all your records in order and start early.
Records relating to Tax, NI, Corporation Tax, VAT, Companies House, the
Information Commissioner and any other relevant bodies. You may also
want to see our article on carrying out background checks prior to
beginning the transaction.
Patience – Finding the right buyer and selling your business is not a
quick process. The seller needs to be patient and must be aware he does
not need to accept the first offer he receives.
Valuation - See our article on valuing your business. Is there anything
that you can do to increase the value of the business?
Implementing the exit strategy can be strenuous and demanding. The
better the preparation the easier the process can be and it is more
likely that you will get the maximum return from your business.
If you're interested in buying or selling a business and would
like to find out more, please contact Izaz Ali on firstname.lastname@example.org.
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Article Published/Sorted/Amended on Scopulus 2014-02-27 10:01:15 in Legal Articles